Slight Drop In Rates Across The Curve, With Lower Breakevens And A Flatter 5s30s TIPS Curve

Initial claims fell sharply to their lowest level since 1969, and focus is now on tomorrow’s CPI report, with core and headline inflation forecasted to jump to 4.9% and 6.8% respectively

Fed Hikes by the end of 2022 priced into 1M USD OIS 12M Forward & Fed Funds Futures (FFZ2) | Source: Refinitiv


The Rise In Rates And Moderate Widening In HY Spreads Took US$ Bonds Down Today

The huge tightening in US HY cash spreads at the beginning of the week (OAS down 37bp w/w) was amplified by the lack of dealer inventory, as the CS chart below shows

Dealer Inventories For US IG & HY Bonds | Source: Credit Suisse


Positive, Though Less Impressive Performance Today In US Equities, Led By Telecoms And Healthcare

Of all the markets that have struggled this year, Hong Kong might be among those that see a positive reversal in 2022, with more clarity on the macro front, as well as supportive policies from Mainland China

Countries With The Best And Worst YTD USD Total Returns | Sources: ϕpost, FactSet


As Rates Volatility Recedes Slightly, Differentials Come Back To The Fore And Drive Yen Down, Euro Up Against The Dollar

Sovereign credit spreads have come down quite dramatically this week across emerging markets, benefiting currencies like the Mexican peso, Brazilian real, South African rand

Brazilian real spot rate and Brazil 5Y USD Sovereign CDS Spread | Source: Refinitiv


US Front-End Rates And Volatility Fall, Curve Steepens As Market Awaits CPI Report On Friday

Good bounce in the TIPS 5s30s spread, as the reflation trade is seeing a little revival this week: lower front-end rates, delayed hikes, higher inflation breakevens, higher terminal rate

US TIPS 5s30s Spread | Source: Refinitiv


Positive Risk Environment, With Much Tighter Credit Spreads Across Both DM & EM

Issuers took advantage of the tighter spreads to launch large new offerings today: Merck took home US$ 8bn in 5 tranches and Emerson Electric raised $ 3bn in 3 tranches

5Y USD CDS Spreads On Mexican and Brazilian Oil Companies | Source: Refinitiv


Huge Day For S&P 500 Technology Stocks (Up 3.51%), As Well As Consumer Discretionary (Up 2.36%)

Volume and volatility are both down markedly since last week, as we saw a second straight day ending with over 86% of S&P 500 stocks up

The Skew In 10-Delta S&P 500 Risk Reversals Is Down As Well (% of ATM) | Sources: ϕpost, Refinitiv data


Risk-On Sentiment Takes The Canadian And Australian Dollars Higher, Following The Rise In Commodities

Although rates volatility remains high, most emerging markets did well today, with the tightening in sovereign credit spreads increasing the attractiveness of recently battered carry currencies like the Brazilian real

CitiFX Macro Long Term Risk Index | Sources: ϕpost, Refinitiv data


Rates Rise Again From The Front Out, With Labor Cost And Productivity Data Pushing Up Inflation Breakevens

The front end of the US yield curve is getting closer to pricing in 3 rate hikes through 2022, with the most likely path being (based on forward OIS rates) the first hike in May or June, the next one in September, and one more in December

Rate Hikes Implied In The 1-Month USD OIS 12 Months Forward | Source: Refinitiv


Spreads Tighten Significantly Across The US Credit Complex, Though IG Bonds Still Fall On Higher Rates

Good start to the week for corporate bond issuance, with the largest offerings coming from Roche Holdings Inc (US$ 6 bn in 3 tranches) and Ecolab ($ 2.5 bn in 4 tranches)

Credit Suisse Shows That USD HY Spreads Tend To Tighten With Rate Hikes | Source: Credit Suisse


86% Up Day For S&P 500 Stocks, As Value And Small Caps Outperformed Growth And Large Caps

Chinese equities are bouncing tonight after the PBOC unexpectedly cut the RRR by 50bp, thereby releasing RMB 1.2 trillion of liquidity (about US$ 185 bn): the Hang Seng SH-SZ-HK 300 Index is currently up 0.90%, led by Hong Kong's battered market (up 1.28%)

The World Market Cap Broken Down By Country (US$ Trillion) | Sources: ϕpost, Factset data


Yen, Swiss Franc, Euro Fall Against The US Dollar On Widening Rates Differentials

Pro-risk currencies like the Canadian Dollar and Australian dollar made good gains today, as core commodities like crude oil and copper rebounded after poor performances last week

Euro spot rate vs EUR-USD Rates Differential (6-Month Rates 18 Months Forward) | Source: Refinitiv